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ITEMS INCLUDED IN GENERAL MERCHANDISE

CONCEPT

The Balance of Payments and International Investment Position Manual Sixth edition (BPM6) states that:

10.17 Because there is a change of ownership of goods between a resident and a nonresident, the following cases are included in the Balance of Payments definition of general merchandise:
(a) Banknotes and coins not in current circulation and unissued securities. They are valued as commodities, rather than at face value. Banknotes and coins may be not in circulation because they have not yet been issued, or they have been withdrawn from circulation and demonetized. Sales of coins to or between collectors at a premium are valued at the transaction price, rather than the face value. (Banknotes and coins in circulation and issued securities are financial instruments and are excluded from goods.);
(b) Electricity, gas, and water. However, charges invoiced separately for the transmission, transport, or distribution of these products are included in services under transport and other business services—see paragraphs 10.74 and 10.159. Allowing water to flow when that flow is required by international law on river flows is not an international transaction;
(c) Noncustomized packaged software (systems and applications), and video and audio recordings, on physical media, such as disks and other devices, with a license for perpetual use are included in general merchandise. These products are included at their full transaction value (i.e., not at the value of the empty disks or other storage device). Software provided in this manner is included in goods; other software is included in services—see paragraphs 10.143–10.144.³ (Noncustomized software is for general use, rather than being made to order. For classification of customized software and other cases, see Table 10.4).;
(d) Goods procured in ports by carriers. Goods such as fuels (bunkering), provisions, stores, ballast, and dunnage procured by non-resident transport operators in ports from resident providers are included in exports of general merchandise. Similarly, goods procured by resident transport operators from nonresident providers are included in imports. Ports are defined widely to include sea and ocean terminals, airports, inland waterways, and providers of goods and services used in a territory by road and rail transport service providers that are residents of another economy. Goods procured by ship’s crew, drivers, etc. for their own use are included in travel. Maintenance and repair costs of transport operators are transport services covered in paragraph 10.72. Fuel costs of small-scale transport operators are goods procured in port by carriers rather than travel (see paragraph 10.81);
(e) Goods supplied or acquired by carriers away from the territory of residence of the operator. For example, fish and other marine products caught by ships operated by residents of the compiling economy and sold abroad directly should be included. Similarly, oil and minerals retrieved from the ocean floor by resident operators and sold abroad directly should be included. The goods could be acquired or sold in foreign ports or at sea to foreign vessels;
(f) Goods acquired by a lessee under a financial lease. Financial leases are defined in paragraph 5.56. Because the lessee is the economic owner, a change of ownership between the seller of the goods and the lessee is recorded at the start of the lease. The lessor has legal title but does not have economic ownership. In contrast, goods under operating leases do not change ownership to the lessee, and thus are not included in general merchandise when delivered to the lessee. (Operating leases are discussed in paragraphs 10.153–10.156.);
(g) Goods sent abroad without a change of ownership, but later sold. Goods sent abroad on consignment or for storage, repair, exhibition, processing, and so forth without a change of ownership are not recorded at the time they are sent abroad, but if they are later sold to a resident of an economy different from that of the owner, they should be recorded in general merchandise. (See paragraph 10.29 for further information on goods on consignment.);
(h) Equipment that is sold while outside the territory of residence of its original owner. For example, equipment originally taken out of the territory for temporary purposes, such as construction, exhibition, or fishing, may be subsequently sold or given away;
(i) Illegal goods;
(j) Smuggled goods that are otherwise legal;
(k) Gifts;
(l) Parcel post where there is a change of ownership;
(m) Goods lost or destroyed after ownership has been acquired by an importer but before the goods have crossed a frontier. (However, goods lost or destroyed before ownership has been acquired by an importer are excluded from merchandise trade);
(n) Livestock that changes ownership;
(o) Government sales of goods to and purchases of goods from nonresidents. Acquisitions of military equipment from nonresidents should be included in general merchandise. Goods supplied by governments to their own embassies, military bases, and so forth involve resident-to-resident transactions and so are not covered in the international accounts. Expenditure by embassies, military bases, and so forth is included under government goods and services n.i.e. (see paragraph 10.175);
(p) Goods where there is no associated payment, such as those financed by grants or loans;
(q) Humanitarian aid in the form of goods;
(r) Goods transferred to or from a buffer stock organization;
(s) Goods acquired to be processed without passing through the territory of the owner (see paragraph 10.65) and goods sold after processing without passing through the territory of the owner (see paragraph 10.66); and
(t) Any other goods where there is a change of ownership that was not identified from data sources.

10.18 When a customs system is used as a source of data on goods, there is a need to make adjustments to include any goods where there is a change of ownership not recorded in customs data or travel. Cases that sometimes arise include shuttle trade (see paragraph 10.19); acquisition of ships, aircraft, and satellites; trade between free trade zones of an economy and residents of other economies; goods in bonded warehouses in economies that use the special trade system; and amounts below customs thresholds.

10.19 Goods for resale acquired by travellers while on visits (sometimes called shuttle trade) are included in general merchandise. Shuttle trade covers transactions involving the purchase of goods in an economy by travelers (nonresidents) who then transport these goods back to their economy of residence where they are to be sold; goods purchased by travelers in their home country for resale abroad; and goods purchased by travelers abroad in one economy and sold abroad in a second economy. It is sometimes also called informal crossborder trade. Because the intent of this travel is not to acquire goods for personal use—recorded under travel—but to engage in a business and to make a profit, the goods acquired and sold are recorded under general merchandise. (Other expenses incurred by these traders are dealt with in paragraphs 10.17(d), 10.72, and 10.81.)

10.20 Goods for own use or to give away acquired by travelers in excess of customs thresholds and included in customs statistics are also included in general merchandise. For example, durable goods (such as cars and electrical goods) and valuables (such as jewelry) may be acquired in this way and be brought back to the territory of residence of the owner. This treatment is consistent with international merchandise trade statistics, but care is needed to avoid double counting such goods by including them also under travel. (See paragraphs 10.86–10.90 for goods included in travel.)